Why U.S. Real Estate Is Embracing Smart Home Tech and the U.K. Isn’t
Back in September, we asked if now was the time to invest in smart home technology. Adoption rates were up, but when it came to real estate, the results were mixed. But that’s hardly surprising; understanding a new market like this is always tricky.
Luckily, we have the U.K. as an example. In fact, a direct comparison with the U.K. really brings these trends into clearer focus: First, that the U.S. is adopting smart home tech faster than anywhere else, and second, that this really shows how perceptions of the technology shape its impact on real estate.
The U.S. Smart Home Tech Consumer Market
At the most basic level, smart home technology and Internet of Things (IoT) sales aren’t meeting the high expectations initially set for the industry. Smart analysis from Business Insider points to an industry stuck in the gap between an early adopter market and the mass market.
No doubt, overall sales are increasing, but investors and consumers are just wondering when that titanic shift into the mainstream is going to happen. One possibility is actually that a grand shift won’t happen, that smart home products will gradually become standard. When this happens, they will begin to dominate the market as consumers replace their old devices.
Think of the growing market share of more efficient light bulbs. There wasn’t a moment when they became extremely popular or mainstream. Instead, over time, everyday consumers decided to replace dead incandescent bulbs with new ones that were a bit more expensive but used less energy and lasted longer. How does all of this impact real estate, though?
How Home Buyers Really See Smart Home Tech
Obviously, smart home tech isn’t yet a basic assumption in real estate, even for new homes. But the basic question most people are wondering about when deciding whether it makes sense to invest in tech is: Will it increase my home’s value? The simple answer is: no, not yet. But that’s not the entire story. Because conversations with real estate brokers reveal that there is another impact of smart home tech: faster sales. Buyers may not yet be willing to pay an extra $10,000 for an integrated system, but the newness of the smart home market that’s dominated by early adopters adds a lot to a home’s “wow factor.”
How can we make these assumptions and understand the markets like this? In part, it’s because we have a handy experiment going on across the pond. Yes, there’s a lot we can learn from the U.K. here.
Are U.K. Homeowners Investing in Smart Home Tech?
The story is undoubtedly different here. One study found a quarter of all U.S. homes are considering adopting smart home technology over the next 12 months. That number in the U.K. is only 7%, with data from previous years showing even that number could be optimistic. Is the U.K. just at an earlier stage of market development?
It’s unlikely. British consumers have similar buying power and access to smart home tech as U.S. consumers. Considering the wide range of products encompassed in this category, we can rule out narrow reasons connected to single products. This is clearly something larger.
One likely suspect is cultural conservatism. It’s no secret that Americans hold a particular love of the latest and greatest gadgets. It’s clear that British early adopters are less enthusiastic about smart home tech than their American cousins. As a result, the best estimates predict market adoption following a similar pattern to that mentioned above: one driven by replacement.
What does that mean for real estate? It’s a reminder that much of this market is driven by intangible forces like culture and perceptions. Perhaps American cultural influence could have an impact, but for now only time will tell. It’ll have to overcome the perception that this technology is still too expensive and it’s not time to invest in it.
What Does This Tell Us?
Consumers are eminently practical. If smart home tech is going to have an impact in real estate beyond adding “wow factor,” it needs to appeal to bottom lines. That means a focus on products with a proven ability to do things like prevent home water leaks or save on energy bills. Then, over time, once consumers begin to see smart home tech as a baseline for new homes, it may begin to impact prices.